As talks dragged on to secure agreement on cutting the cost of the nationalisation of Anglo Irish Bank, Chief Whip Paul Kehoe told politicians in Dublin that officials had worked "extremely hard". "We are optimistic that an arrangement agreeable by all parties can be found," Mr Kehoe said.

Patrick Honohan, governor of the Central Bank of Ireland, was leading negotiations with counterparts from the European Central Bank (ECB) in Frankfurt.

It is believed the proposal is designed to see the state's existing promissory note - a high interest IOU with 28 billion euro outstanding - replaced with several long-term government bonds.

President Michael D Higgins cut short an official visit to Rome to return to Dublin to sign legislation into law if necessary. A spokesman said Mr Higgins had left to "make himself available in the possibility of there being legislation to consider".

The board of the Irish Bank Resolution Corporation (IBRC), the rebranded Anglo, has been stood down by the Government.

Under the proposed deal, the state would make annual interest payments on the bonds - believed to run out between 30 and 40 years - and would pay the principal sum upon its expiry. The IBRC will be liquidated as part of the deal.

Government sources claimed the new plan, if accepted by the ECB, would be "very advantageous" for Ireland.

Taoiseach Enda Kenny said the legislation would ensure the protection of between 12 and 14 billion euro worth of assets belonging to the state. He warned that not dealing with the issue could result in potential liabilities of up to 40 billion euro for the country.

The text of the Bill states it aims to "provide for the orderly winding up of the affairs of IBRC to help to address the continuing serious disturbance in the economy of the state".